Startups on the rise

The decline in entrepreneurial activity nationwide did not start with the Great Recession that lasted from December 2007 to June 2009, but the trend worsened in that downturn.

Federal Reserve Bank of Cleveland research has shown that during the 2007-2009 recession both employer firms and solo operations declined in number.

Fortunately, over the last year or so signs of a turnaround in entrepreneurial activity have emerged.

The 2015 Kauffman Index: Startup Activity, a benchmark of new business creation from the Kauffman Foundation, showed the growth in the number of new entrepreneurs in 2014 was the largest in two decades.

More recent data indicate the upward trend is continuing. According to Labor Department figures released in December, the number of employer firms nationwide in the second quarter was up 2.8 percent compared with a year earlier—the biggest annual gain since the late 1990s.

Moreover, there has been a notable increase in fledgling businesses. As of last March, the number of firms less than one year old was 7.5 percent higher. Also up were the number of businesses three years or younger and their total employment.

The most recent data for Monroe County businesses show a decline from 2007 to 2009, but a rebound by 2013, though still not to the number just before the start of the recession.

The 2015 Kauffman Foundation report cautioned that though entrepreneurial activity was ramping up again, the latest numbers still reflected a long-term decline in startup rates. So, indeed, it’s too soon to celebrate.

To ensure that the rebound continues and grows stronger, government at all levels should work to eliminate unnecessary regulations that hinder many startups. Improving entrepreneurs’ access to business resources is another common-sense step.

Entrepreneurial firms, of course, are only one piece of the economic puzzle; and their attrition rate is high. But growth without a healthy startup rate is very hard to achieve.
2/5/2016 (c) 2016 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.